##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2006
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File No. 000-15191
 Valley National Gases Incorporated
  Pennsylvania
    
    23-2888240(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 200 West Beau Street, Suite 200
Washington, Pennsylvania 15301
 (724) 228-3000
  Yes þ
    
    No o
  o o þ
  Yes o
    
    No þ
  Class
    
    Outstanding at May 10, 2006Common stock, $0.001 par value
    
    9,657,224




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##### 



TABLE OF CONTENTS
 PagePART I
    
    FINANCIAL INFORMATIONItem 1
    
    Financial StatementsCondensed Consolidated Balance Sheets as of June 30, 2005 and March 31, 2006 (unaudited)
    
    
    3Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2005 and 2006 (unaudited)
    
    
    5Condensed Consolidated Statements of Operations for the Nine Months Ended March 31, 2005 and 2006 (unaudited)
    
    
    6Consolidated Statements of Changes in Stockholders Equity for the Year Ended June 30, 2005 and Nine Months Ended March 31, 2006 (unaudited)
    
    
    7Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2005 and 2006 (unaudited)
    
    
    8Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    9Item 2
    
    Management's Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 3
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    33Item 4
    
    Controls and Procedures
    
    
    34PART II
    
    OTHER INFORMATIONItem 6
    
    Exhibits
    
    
    35Signatures
    
    
    
    
    36EX-31.1EX-31.2EX-32.1EX-32.2
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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM I. FINANCIAL STATEMENTS
 VALLEY NATIONAL GASES INCORPORATED
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    March 31,2005
    
    
    2006(unaudited)A S S E T SCURRENT ASSETS:Cash and cash equivalents
    
    $
    1,322,397
    
    
    $
    1,143,892Accounts receivable, net of allowance for
doubtful accounts of $672,822 and
$1,006,754, respectively
    
    
    16,956,510
    
    
    
    26,134,759Inventory
    
    
    9,868,974
    
    
    
    12,514,554Prepaids and other
    
    
    1,036,410
    
    
    
    1,453,561Current deferred tax asset
    
    
    1,774,379
    
    
    
    2,555,159Prepaid and refundable taxes
    
    
    1,471,519
    
    
    
    Total current assets
    
    
    32,430,189
    
    
    
    43,801,925PROPERTY, PLANT AND EQUIPMENT:Land
    
    
    2,099,915
    
    
    
    2,184,191Buildings and improvements
    
    
    21,416,658
    
    
    
    23,172,593Equipment
    
    
    100,332,506
    
    
    
    118,485,718Transportation equipment
    
    
    19,249,082
    
    
    
    21,235,185Furniture and fixtures
    
    
    8,756,310
    
    
    
    9,506,857Total property, plant and equipment
    
    
    151,854,471
    
    
    
    174,584,544Accumulated depreciation
    
    
    (57,737,096
    )
    
    
    (62,618,745
    )Net property, plant and equipment
    
    
    94,117,375
    
    
    
    111,965,799OTHER ASSETS:Intangible assets, net of accumulated amortization of
$7,329,315 and $7,979,174, respectively
    
    
    2,607,058
    
    
    
    4,280,738Goodwill
    
    
    45,482,910
    
    
    
    54,510,619Deposits and other assets
    
    
    448,429
    
    
    
    595,094Total other assets
    
    
    48,538,397
    
    
    
    59,386,451TOTAL ASSETS
    
    $
    175,085,961
    
    
    $
    215,154,175
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VALLEY NATIONAL GASES INCORPORATED
 CONDENSED CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    March 31,2005
    
    
    2006(unaudited)LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Current maturities of long-term debt
    
    $
    3,674,444
    
    
    $
    3,534,543Bank overdraft
    
    
    
    
    
    
    411,367Accounts payable
    
    
    8,679,057
    
    
    
    12,396,056Accrued compensation and employee benefits
    
    
    4,181,792
    
    
    
    4,123,136Interest rate derivatives
    
    
    196,741
    
    
    
    Other current liabilities
    
    
    4,840,217
    
    
    
    8,368,407Total current liabilities
    
    
    21,572,251
    
    
    
    28,833,509LONG-TERM DEBT, less current maturities
    
    
    60,925,763
    
    
    
    73,763,154DEFERRED TAX LIABILITY
    
    
    26,935,848
    
    
    
    32,860,762OTHER LONG-TERM LIABILITIES
    
    
    670,615
    
    
    
    1,277,454Total liabilities
    
    
    110,104,477
    
    
    
    136,734,879MINORITY INTEREST IN VARIABLE INTEREST ENTITIES
    
    
    5,118,999
    
    
    
    5,440,067COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITY:Preferred stock, par value, $.01 per share
Authorized, 5,000,000 shares, none Issued or
Outstanding
    
    
    
    
    
    
    Common stock, par value, $.001 per share-
Authorized, 30,000,000 shares;Issued, 9,620,084 and 9,645,724 shares,
respectively, Outstanding, 9,574,999 and
9,645,724 shares, respectively
    
    
    9,620
    
    
    
    9,646Paid-in-capital
    
    
    19,160,327
    
    
    
    19,635,484Retained earnings
    
    
    41,185,428
    
    
    
    53,074,152Accumulated other comprehensive (loss) income
    
    
    (118,806
    )
    
    
    259,947Treasury stock at cost, 45,085 and 0
shares, respectively
    
    
    (374,084
    )
    
    
    Total stockholders equity
    
    
    59,862,485
    
    
    
    72,979,229TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    175,085,961
    
    
    $
    215,154,175
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VALLEY NATIONAL GASES INCORPORATED
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  Three Months EndedMarch 31,2005
    
    
    2006NET SALES
    
    $
    50,488,243
    
    
    $
    63,577,966COSTS AND EXPENSESCost of products sold, excluding depreciation
    
    
    23,310,094
    
    
    
    31,061,046Operating, distribution and administrative
    
    
    15,162,963
    
    
    
    18,547,119Depreciation
    
    
    1,633,167
    
    
    
    2,127,316Amortization of intangibles
    
    
    243,003
    
    
    
    191,422Loss (gain) on disposal of assets
    
    
    59,038
    
    
    
    (151,352
    )Total costs and expenses
    
    
    40,408,265
    
    
    
    51,775,551INCOME FROM OPERATIONS
    
    
    10,079,978
    
    
    
    11,802,415INTEREST EXPENSE
    
    
    1,004,423
    
    
    
    1,166,655OTHER INCOME, NET
    
    
    99,918
    
    
    
    158,873EARNINGS BEFORE MINORITY INTEREST
    
    
    9,175,473
    
    
    
    10,794,633MINORITY INTEREST
    
    
    337,697
    
    
    
    307,025NET EARNINGS BEFORE TAXES
    
    
    8,837,776
    
    
    
    10,487,608PROVISION FOR INCOME TAXES
    
    
    3,297,998
    
    
    
    4,064,032NET EARNINGS
    
    $
    5,539,778
    
    
    $
    6,423,576BASIC EARNINGS PER SHARE
    
    $
    0.58
    
    
    $
    0.67DILUTED EARNINGS PER SHARE
    
    $
    0.57
    
    
    $
    0.66WEIGHTED AVERAGE SHARES:Basic
    
    
    9,492,746
    
    
    
    9,636,856Diluted
    
    
    9,674,975
    
    
    
    9,795,790
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VALLEY NATIONAL GASES INCORPORATED
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  Nine Months EndedMarch 31,2005
    
    
    2006NET SALES
    
    $
    129,892,135
    
    
    $
    161,659,314COSTS AND EXPENSESCost of products sold, excluding depreciation
    
    
    60,859,258
    
    
    
    79,439,854Operating, distribution and administrative
    
    
    42,373,432
    
    
    
    51,427,597Depreciation
    
    
    4,956,534
    
    
    
    5,925,232Amortization of intangibles
    
    
    865,280
    
    
    
    649,859Loss (gain) on disposal of assets
    
    
    120,310
    
    
    
    (216,367
    )Total costs and expenses
    
    
    109,174,814
    
    
    
    137,226,175INCOME FROM OPERATIONS
    
    
    20,717,321
    
    
    
    24,433,139INTEREST EXPENSE
    
    
    3,352,621
    
    
    
    3,239,226OTHER INCOME, NET
    
    
    341,055
    
    
    
    479,415EARNINGS BEFORE MINORITY INTEREST
    
    
    17,705,755
    
    
    
    21,673,328MINORITY INTEREST
    
    
    712,445
    
    
    
    751,505NET EARNINGS BEFORE TAXES
    
    
    16,993,310
    
    
    
    20,921,823PROVISION FOR INCOME TAXES
    
    
    6,397,100
    
    
    
    8,071,722NET EARNINGS
    
    $
    10,596,210
    
    
    $
    12,850,101BASIC EARNINGS PER SHARE
    
    $
    1.12
    
    
    $
    1.34DILUTED EARNINGS PER SHARE
    
    $
    1.10
    
    
    $
    1.32WEIGHTED AVERAGE SHARES:Basic
    
    
    9,489,221
    
    
    
    9,602,888Diluted
    
    
    9,652,974
    
    
    
    9,758,385
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VALLEY NATIONAL GASES INCORPORATED
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
  AccumulatedOther
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Treasury Stock
    
    
    Paid-in-
    
    
    Comprehensive
    
    
    Retained
    
    
    Stockholders
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Income (Loss)
    
    
    Earnings
    
    
    Equity
    
    
    IncomeBALANCE, June 30, 2004
    
    
    9,620,084
    
    
    
    9,620
    
    
    
    155,500
    
    
    
    (1,291,633
    )
    
    
    18,905,761
    
    
    
    (1,184,309
    )
    
    
    29,668,686
    
    
    
    46,108,125
    
    
    
    Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,370,670
    
    
    
    12,370,670
    
    
    $
    12,370,670Dividend paid, per share $0.09
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (853,928
    )
    
    
    (853,928
    )
    
    
    Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    (110,415
    )
    
    
    917,549
    
    
    
    (142,575
    )
    
    
    
    
    
    
    
    
    
    
    774,974
    
    
    
    Tax benefit from exercise of stock
options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    397,141
    
    
    
    
    
    
    
    
    
    
    
    397,141
    
    
    
    Unrealized gains on derivatives
designated and qualified as cash flow
hedges, net of tax provision of $665,159
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    997,739
    
    
    
    
    
    
    
    997,739
    
    
    
    997,739Reclassification of unrealized gains on
derivatives, net of tax provision of $45,176
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,764
    
    
    
    
    
    
    
    67,764
    
    
    
    67,764BALANCE, June 30, 2005
    
    
    9,620,084
    
    
    
    9,620
    
    
    
    45,085
    
    
    
    (374,084
    )
    
    
    19,160,327
    
    
    
    (118,806
    )
    
    $
    41,185,428
    
    
    $
    59,862,485
    
    
    $
    13,436,173Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,850,101
    
    
    
    12,850,101
    
    
    $
    12,850,101Dividend paid, per share $0.10
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (961,377
    )
    
    
    (961,377
    )
    
    
    Exercise of stock options
    
    
    25,640
    
    
    
    26
    
    
    
    (45,085
    )
    
    
    374,084
    
    
    
    102,705
    
    
    
    
    
    
    
    
    
    
    
    476,815
    
    
    
    Tax benefit from exercise of stock
options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    231,843
    
    
    
    
    
    
    
    
    
    
    
    231,843
    
    
    
    Non-cash stock compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    140,609
    
    
    
    
    
    
    
    
    
    
    
    140,609
    
    
    
    Unrealized gains on derivatives
designated and qualified as cash flow
hedges, net of tax provision of $251,995
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    377,993
    
    
    
    
    
    
    
    377,993
    
    
    
    377,993Reclassification of unrealized gains on
derivatives, net of tax provision of $507
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    760
    
    
    
    
    
    
    
    760
    
    
    
    760BALANCE, March 31, 2006
(unaudited)
    
    
    9,645,724
    
    
    $
    9,646
    
    
    
    
    
    
    $
    
    
    
    $
    19,635,484
    
    
    $
    259,947
    
    
    $
    53,074,152
    
    
    $
    72,979,229
    
    
    $
    13,228,854
 The accompanying notes are an integral part of these consolidated financial statements.
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VALLEY NATIONAL GASES INCORPORATED
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine Months EndedMarch 31,2005
    
    
    2006NET CASH PROVIDED BY OPERATING ACTIVITIES
    
    $
    17,991,620
    
    
    $
    17,951,663CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from disposal of assets
    
    
    66,340
    
    
    
    327,766Purchases of property and equipment
    
    
    (7,804,683
    )
    
    
    (6,786,775
    )Business acquisitions, net of cash acquired
    
    
    
    
    
    
    (23,715,018
    )Net cash used by investing activities
    
    
    (7,738,343
    )
    
    
    (30,174,027
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from borrowings
    
    
    41,390,743
    
    
    
    65,539,410Principal payments on borrowings
    
    
    (49,465,723
    )
    
    
    (52,991,919
    )Proceeds (repayment) of bank overdraft
    
    
    (668,046
    )
    
    
    411,367Dividend paid
    
    
    (853,928
    )
    
    
    (961,377
    )Proceeds from exercise of stock options
    
    
    701,274
    
    
    
    476,815Variable interest entity distribution
    
    
    (1,177,879
    )
    
    
    (430,437
    )Net cash provided (used) by financing activities
    
    
    (10,073,559
    )
    
    
    12,043,859NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    179,718
    
    
    
    (178,505
    )CASH AND CASH EQUIVALENTS, beginning of period
    
    
    549,002
    
    
    
    1,322,397CASH AND CASH EQUIVALENTS, end of period
    
    $
    728,720
    
    
    $
    1,143,892
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VALLEY NATIONAL GASES INCORPORATED
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 BASIS OF PRESENTATION:
   ORGANIZATION
  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    - 9 -




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2005
    
    
    2006Balance, June 30
    
    $
    747,309
    
    
    $
    672,822Write-off of doubtful accounts
    
    
    499,525
    
    
    
    918,431Provision for doubtful accounts
    
    
    (374,012
    )
    
    
    (584,499
    )Balance, March 31
    
    $
    872,822
    
    
    $
    1,006,754
    June 30,
    
    
    March 31,2005
    
    
    2006(Unaudited)Hard goods
    
    $
    8,258,169
    
    
    $
    10,496,333Gases
    
    
    2,010,299
    
    
    
    3,042,620Reserves
    
    
    (399,494
    )
    
    
    (1,024,399
    )$
    9,868,974
    
    
    $
    12,514,554
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For the Nine Months EndedMarch 31,2005
    
    
    2006Non-cash
financing activity and investing activity Non-cash adjustment to goodwill
    
    
    
    
    
    
    (750,033
    )Fixed asset purchases in accounts payable
    
    
    685,494
    
    
    
    348,776
 ACQUISITIONS:
  - 12 -




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Cash and cash equivalents
    
    $
    424Accounts receivable
    
    
    2,156Inventory
    
    
    2,192Fixed assets including cylinders, bulk
tanks and other equipment
    
    
    16,818Non-compete agreements
    
    
    374Customer relationships
    
    
    1,950Goodwill
    
    
    9,028Accounts payable
    
    
    (842
    )Accrued compensation
    
    
    (167
    )Other liabilities
    
    
    (1,662
    )Deferred income taxes
    
    
    (5,680
    )Debt
    
    
    (374
    )Net assets acquired
    
    
    24,217Professional fees paid
    
    
    (78
    )Cash acquired
    
    
    (424
    )Total purchase price
    
    $
    23,715
   Nine Months EndedMarch 31,2006
    
    
    2005Net sales
    
    $
    169,939,000
    
    
    $
    147,043,000Net earnings before income taxes
    
    
    20,858,000
    
    
    
    17,699,000Pro forma net earnings
    
    
    12,811,000
    
    
    
    11,365,000Pro forma diluted earnings per share
    
    $
    1.31
    
    
    $
    1.18
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GOODWILL AND INTANGIBLE ASSETS:
  AccumulatedGross
    
    
    Accumulated
    
    
    Gross Amount
    
    
    Amortization
    
    
    WeightedAmount
    
    
    Amortization
    
    
    as of
    
    
    as of
    
    
    Averageas of
    
    
    as of
    
    
    March 31,
    
    
    March 31,
    
    
    AmortizationJune 30,
    
    
    June 30,
    
    
    2006
    
    
    2006
    
    
    Period2005
    
    
    2005
    
    
    (unaudited)
    
    
    (unaudited)
    
    
    (years)Non-competition
agreements
    
    $
    8,443,480
    
    
    $
    7,196,332
    
    
    $
    8,816,980
    
    
    $
    7,685,184
    
    
    
    9.0Consulting
agreements
    
    
    150,000
    
    
    
    70,833
    
    
    
    150,000
    
    
    
    108,333
    
    
    
    3.0Customer
relationships
    
    
    1,342,893
    
    
    
    62,150
    
    
    
    3,292,932
    
    
    
    185,657
    
    
    
    15.0Total
    
    $
    9,936,373
    
    
    $
    7,329,315
    
    
    $
    12,259,912
    
    
    $
    7,979,174
  Fiscal year EndingJune 30,Remainder of 2006
    
    $173,3332007
    
    $672,4972008
    
    $631,2472009
    
    $360,0322010
    
    $250,9952011
    
    $250,995
  Balance as of June 30, 2005
    
    $
    45,482,910Goodwill acquired
    
    
    9,027,709Balance as of March 31, 2006
    
    $
    54,510,619
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EARNINGS PER SHARE
  Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,2005
    
    
    2006
    
    
    2005
    
    
    2006Net earnings available for common
stock
    
    $
    5,539,778
    
    
    $
    6,423,576
    
    
    $
    10,596,210
    
    
    $
    12,850,101Basic earnings per common share:Weighted average common shares
    
    
    9,492,746
    
    
    
    9,636,856
    
    
    
    9,489,221
    
    
    
    9,602,888Basic earnings per common share
    
    $
    0.58
    
    
    $
    0.67
    
    
    $
    1.12
    
    
    $
    1.34Diluted earnings per common share:Weighted average common shares
    
    
    9,492,746
    
    
    
    9,636,856
    
    
    
    9,489,221
    
    
    
    9,602,888Shares issuable from assumed
conversion of common stock
equivalents
    
    
    182,229
    
    
    
    158,934
    
    
    
    163,753
    
    
    
    155,497Weighted average common and
common equivalent shares
    
    
    9,674,975
    
    
    
    9,795,790
    
    
    
    9,652,974
    
    
    
    9,758,385Diluted earnings per common
share
    
    $
    0.57
    
    
    $
    0.66
    
    
    $
    1.10
    
    
    $
    1.32
  LEASE OBLIGATIONS
    - 15 -




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##### Table of Contents



Fiscal yearending
    
    
    
    
    
    
    
    
    
    
    
    
    
    Elimination
    
    
    FinalJune 30,
    
    Real Estate
    
    
    Equipment
    
    
    Subtotal
    
    
    (1)
    
    
    TotalRemainder of 2006
    
    $
    1,029,284
    
    
    $
    12,675
    
    
    $
    1,041,959
    
    
    $
    615,922
    
    
    $
    426,0372007
    
    
    4,171,315
    
    
    
    26,100
    
    
    
    4,197,415
    
    
    
    2,498,630
    
    
    
    1,698,7852008
    
    
    4,275,598
    
    
    
    
    
    
    
    4,275,598
    
    
    
    2,561,096
    
    
    
    1,714,5022009
    
    
    4,382,488
    
    
    
    
    
    
    
    4,382,488
    
    
    
    2,625,123
    
    
    
    1,757,3652010
    
    
    4,492,050
    
    
    
    
    
    
    
    4,492,050
    
    
    
    2,690,751
    
    
    
    1,801,2992011
    
    
    4,604,351
    
    
    
    
    
    
    
    4,604,351
    
    
    
    2,758,020
    
    
    
    1,846,331Totals
    
    $
    22,955,086
    
    
    $
    38,775
    
    
    $
    22,993,861
    
    
    $
    13,749,542
    
    
    $
    9,244,319
 
 (1)
    
    Reflects the elimination of intercompany rent as a result of FIN 46R, Consolidation of
Variable Interest Entities. COMMITMENTS AND CONTINGENCIES
    - 16 -




---



##### Table of Contents



VARIABLE INTEREST ENTITIES
    - 17 -




---



##### Table of Contents



A S S E T S
    
    As of March 31, 2006(unaudited)Variable InterestValley
    
    
    EntitiesSegment
    
    
    Segment
    
    
    Eliminations
    
    
    CompanyCURRENT ASSETS:Cash and cash equivalents
    
    $
    218,444
    
    
    $
    925,448
    
    
    $
    
    
    
    $
    1,143,892Accounts receivable, net of
allowance for doubtful accounts
of $1,006,754
    
    
    26,004,040
    
    
    
    280,300
    
    
    
    (149,581
    )
    
    
    26,134,759Inventory
    
    
    12,514,554
    
    
    
    
    
    
    
    
    
    
    
    12,514,554Prepaids and other
    
    
    1,442,319
    
    
    
    11,242
    
    
    
    
    
    
    
    1,453,561Current deferred tax asset
    
    
    2,555,159
    
    
    
    
    
    
    
    
    
    
    
    2,555,159Refundable taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total current assets
    
    
    42,734,516
    
    
    
    1,216,990
    
    
    
    (149,581
    )
    
    
    43,801,925PROPERTY, PLANT AND EQUIPMENT:Land
    
    
    175,000
    
    
    
    2,009,191
    
    
    
    
    
    
    
    2,184,191Buildings and improvements
    
    
    8,553,468
    
    
    
    14,619,125
    
    
    
    
    
    
    
    23,172,593Equipment
    
    
    117,086,645
    
    
    
    1,399,073
    
    
    
    
    
    
    
    118,485,718Transportation equipment
    
    
    21,061,936
    
    
    
    173,249
    
    
    
    
    
    
    
    21,235,185Furniture and fixtures
    
    
    9,321,350
    
    
    
    185,507
    
    
    
    
    
    
    
    9,506,857Total property, plant and
equipment
    
    
    156,198,399
    
    
    
    18,386,145
    
    
    
    
    
    
    
    174,584,544Accumulated depreciation
    
    
    (57,555,014
    )
    
    
    (5,063,731
    )
    
    
    
    
    
    
    (62,618,745
    )Net property, plant and
equipment
    
    
    98,643,385
    
    
    
    13,322,414
    
    
    
    
    
    
    
    111,965,799OTHER ASSETS:Intangible assets, net of
accumulated amortization of$7,979,174
    
    
    4,280,738
    
    
    
    
    
    
    
    
    
    
    
    4,280,738Goodwill
    
    
    54,510,619
    
    
    
    
    
    
    
    
    
    
    
    54,510,619Deposits and other assets
    
    
    581,352
    
    
    
    13,742
    
    
    
    
    
    
    
    595,094Total other assets
    
    
    59,372,709
    
    
    
    13,742
    
    
    
    
    
    
    
    59,386,451TOTAL ASSETS
    
    $
    200,750,610
    
    
    $
    14,553,146
    
    
    $
    (149,581
    )
    
    $
    215,154,175
 - 18 -




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##### Table of Contents



LIABILITIES AND STOCKHOLDERS' EQUITY
    
    As of March 31, 2006(unaudited)Variable InterestValley
    
    
    EntitiesSegment
    
    
    Segment
    
    
    Eliminations
    
    
    CompanyCURRENT LIABILITIES:Current maturities of long-term
debt
    
    $
    777,247
    
    
    $
    2,757,296
    
    
    $
    
    
    
    $
    3,534,543Bank overdraft
    
    
    411,367
    
    
    
    
    
    
    
    
    
    
    
    411,367Accounts payable
    
    
    12,070,330
    
    
    
    325,726
    
    
    
    
    
    
    
    12,396,056Accrued compensation and employee
benefits
    
    
    4,123,136
    
    
    
    
    
    
    
    
    
    
    
    4,123,136Other current liabilities
    
    
    8,362,921
    
    
    
    155,067
    
    
    
    (149,581
    )
    
    
    8,368,407Total current
liabilities
    
    
    25,745,001
    
    
    
    3,238,089
    
    
    
    (149,581
    )
    
    
    28,833,509LONG-TERM DEBT, less current maturities
    
    
    67,888,164
    
    
    
    5,874,990
    
    
    
    
    
    
    
    73,763,154DEFERRED TAX LIABILITY
    
    
    32,860,762
    
    
    
    
    
    
    
    
    
    
    
    32,860,762OTHER LONG-TERM LIABILITIES
    
    
    1,277,454
    
    
    
    
    
    
    
    
    
    
    
    1,277,454Total liabilities
    
    
    127,771,381
    
    
    
    9,113,079
    
    
    
    (149,581
    )
    
    
    136,734,879MINORITY INTEREST IN VARIABLE INTEREST
ENTITIES
    
    
    
    
    
    
    
    
    
    
    5,440,067
    
    
    
    5,440,067STOCKHOLDERS EQUITY:Preferred stock, par value, $.01
per shareAuthorized, 5,000,000 shares,
none Issued or OutstandingCommon stock, par value, $.001 per
share-Authorized, 30,000,000 shares;Issued and outstanding, 9,645,724 shares
    
    
    9,646
    
    
    
    3,800
    
    
    
    (3,800
    )
    
    
    9,646Paid-in-capital
    
    
    19,635,484
    
    
    
    335,985
    
    
    
    (335,985
    )
    
    
    19,635,484Retained earnings
    
    
    53,074,152
    
    
    
    5,100,282
    
    
    
    (5,100,282
    )
    
    
    53,074,152Accumulated other comprehensive
income (loss)
    
    
    259,947
    
    
    
    
    
    
    
    
    
    
    
    259,947Total stockholders
equity
    
    
    72,979,229
    
    
    
    5,440,067
    
    
    
    (5,440,067
    )
    
    
    72,979,229TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    200,750,610
    
    
    $
    14,553,146
    
    
    $
    (149,581
    )
    
    $
    215,154,175
 - 19 -




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##### Table of Contents



A S S E T S
    
    As of June 30, 2005Variable InterestValley
    
    
    EntitiesSegment
    
    
    Segment
    
    
    Eliminations
    
    
    CompanyCURRENT ASSETS:Cash and cash equivalents
    
    $
    548,925
    
    
    $
    773,472
    
    
    $
    
    
    
    $
    1,322,397Accounts receivable, net of
allowance for doubtful accounts
of $672,822
    
    
    16,825,355
    
    
    
    248,851
    
    
    
    (117,696
    )
    
    
    16,956,510Inventory
    
    
    9,868,974
    
    
    
    
    
    
    
    
    
    
    
    9,868,974Prepaids and other
    
    
    1,026,410
    
    
    
    10,000
    
    
    
    
    
    
    
    1,036,410Current deferred tax asset
    
    
    1,774,379
    
    
    
    
    
    
    
    
    
    
    
    1,774,379Refundable taxes
    
    
    1,471,519
    
    
    
    
    
    
    
    
    
    
    
    1,471,519Total current assets
    
    
    31,515,562
    
    
    
    1,032,323
    
    
    
    (117,696
    )
    
    
    32,430,189PROPERTY, PLANT AND EQUIPMENT:Land
    
    
    75,000
    
    
    
    2,024,915
    
    
    
    
    
    
    
    2,099,915Buildings and improvements
    
    
    7,512,593
    
    
    
    13,904,065
    
    
    
    
    
    
    
    21,416,658Equipment
    
    
    99,138,620
    
    
    
    1,193,886
    
    
    
    
    
    
    
    100,332,506Transportation equipment
    
    
    19,075,833
    
    
    
    173,249
    
    
    
    
    
    
    
    19,249,082Furniture and fixtures
    
    
    8,581,988
    
    
    
    174,322
    
    
    
    
    
    
    
    8,756,310Total property, plant and
equipment
    
    
    134,384,034
    
    
    
    17,470,437
    
    
    
    
    
    
    
    151,854,471Accumulated depreciation
    
    
    (53,073,285
    )
    
    
    (4,663,811
    )
    
    
    
    
    
    
    (57,737,096
    )Net property, plant and
equipment
    
    
    81,310,749
    
    
    
    12,806,626
    
    
    
    
    
    
    
    94,117,375OTHER ASSETS:Intangible assets, net of
accumulated amortization of $7,329,315
    
    
    2,607,058
    
    
    
    
    
    
    
    
    
    
    
    2,607,058Goodwill
    
    
    45,482,910
    
    
    
    
    
    
    
    
    
    
    
    45,482,910Deposits and other assets
    
    
    434,687
    
    
    
    13,742
    
    
    
    
    
    
    
    448,429Total other assets
    
    
    48,524,655
    
    
    
    13,742
    
    
    
    
    
    
    
    48,538,397TOTAL ASSETS
    
    $
    161,350,966
    
    
    $
    13,852,691
    
    
    $
    (117,696
    )
    
    $
    175,085,961
 - 20 -




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##### Table of Contents



LIABILITIES AND STOCKHOLDERS EQUITY
    
    As of June 30, 2005VariableInterestValley
    
    
    EntitiesSegment
    
    
    Segment
    
    
    Eliminations
    
    
    CompanyCURRENT LIABILITIES:Current maturities of long-term
debt
    
    $
    1,434,427
    
    
    $
    2,240,017
    
    
    $
    
    
    
    $
    3,674,444Accounts payable
    
    
    8,390,239
    
    
    
    288,818
    
    
    
    
    
    
    
    8,679,057Accrued compensation and
employee benefits
    
    
    4,181,792
    
    
    
    
    
    
    
    
    
    
    
    4,181,792Interest rate derivatives
    
    
    196,741
    
    
    
    
    
    
    
    
    
    
    
    196,741Other current liabilities
    
    
    4,846,043
    
    
    
    111,870
    
    
    
    (117,696
    )
    
    
    4,840,217Total current liabilities
    
    
    19,049,242
    
    
    
    2,640,705
    
    
    
    (117,696
    )
    
    
    21,572,251LONG-TERM DEBT, less current maturities
    
    
    54,832,776
    
    
    
    6,092,987
    
    
    
    
    
    
    
    60,925,763DEFERRED TAX LIABILITY
    
    
    26,935,848
    
    
    
    
    
    
    
    
    
    
    
    26,935,848OTHER LONG-TERM LIABILITIES
    
    
    670,615
    
    
    
    
    
    
    
    
    
    
    
    670,615Total liabilities
    
    
    101,488,481
    
    
    
    8,733,692
    
    
    
    (117,696
    )
    
    
    110,104,477MINORITY INTEREST IN VARIABLE
INTEREST ENTITIES
    
    
    
    
    
    
    
    
    
    
    5,118,999
    
    
    
    5,118,999STOCKHOLDERS EQUITY:Preferred stock, par value, $.01
per shareAuthorized,
5,000,000 shares, none Issued or OutstandingCommon stock, par value, $.001Per share-Authorized, 30,000,000 shares;
Issued, 9,620,084 shares,
Outstanding, 9,574,999 shares
    
    
    9,620
    
    
    
    3,800
    
    
    
    (3,800
    )
    
    
    9,620Paid-in-capital
    
    
    19,160,327
    
    
    
    335,985
    
    
    
    (335,985
    )
    
    
    19,160,327Retained earnings
    
    
    41,185,428
    
    
    
    4,779,214
    
    
    
    (4,779,214
    )
    
    
    41,185,428Accumulated other comprehensive
loss
    
    
    (118,806
    )
    
    
    
    
    
    
    
    
    
    
    (118,806
    )Treasury stock at cost, 45,085
shares
    
    
    (374,084
    )
    
    
    
    
    
    
    
    
    
    
    (374,084
    )Total stockholders equity
    
    
    59,862,485
    
    
    
    5,118,999
    
    
    
    (5,118,999
    )
    
    
    59,862,485TOTAL LIABILITIES AND STOCKHOLDERS
EQUITY
    
    $
    161,350,966
    
    
    $
    13,852,691
    
    
    $
    (117,696
    )
    
    $
    175,085,961
 - 21 -




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##### Table of Contents



Valley
    
    
    Variable Interest EntitiesSegment
    
    
    Segment
    
    
    Eliminations
    
    
    CompanyNET SALES
    
    $
    161,659,313
    
    
    $
    1,788,787
    
    
    $
    (1,788,786
    )
    
    $
    161,659,314COSTS AND EXPENSESCost of products sold, excluding
depreciation
    
    
    79,439,854
    
    
    
    
    
    
    
    
    
    
    
    79,439,854Operating, distribution and
administrative
    
    
    52,515,309
    
    
    
    701,074
    
    
    
    (1,788,786
    )
    
    
    51,427,597Depreciation
    
    
    5,498,519
    
    
    
    426,713
    
    
    
    
    
    
    
    5,925,232Amortization of intangibles
    
    
    649,859
    
    
    
    
    
    
    
    
    
    
    
    649,859Gain on disposal of assets
    
    
    (46,591
    )
    
    
    (169,776
    )
    
    
    
    
    
    
    (216,367
    )Total costs and expenses
    
    
    138,056,950
    
    
    
    958,011
    
    
    
    (1,788,786
    )
    
    
    137,226,175INCOME FROM OPERATIONS
    
    
    23,602,363
    
    
    
    830,776
    
    
    
    
    
    
    
    24,433,139INTEREST EXPENSE
    
    
    2,968,445
    
    
    
    270,781
    
    
    
    
    
    
    
    3,239,226OTHER INCOME, NET
    
    
    287,905
    
    
    
    191,510
    
    
    
    
    
    
    
    479,415EARNINGS BEFORE MINORITY INTEREST
    
    
    20,921,823
    
    
    
    751,505
    
    
    
    
    
    
    
    21,673,328MINORITY INTEREST
    
    
    
    
    
    
    751,505
    
    
    
    
    
    
    
    751,505NET EARNINGS BEFORE TAXES
    
    
    20,921,823
    
    
    
    
    
    
    
    
    
    
    
    20,921,823PROVISION FOR INCOME TAXES
    
    
    8,071,722
    
    
    
    
    
    
    
    
    
    
    
    8,071,722NET EARNINGS
    
    $
    12,850,101
    
    
    $
    
    
    
    $
    
    
    
    $
    12,850,101
  Variable InterestValley
    
    
    EntitiesSegment
    
    
    Segment
    
    
    Eliminations
    
    
    CompanyNET SALES
    
    $
    129,892,135
    
    
    $
    1,639,098
    
    
    $
    (1,639,098
    )
    
    $
    129,892,135COSTS AND EXPENSESCost of products sold, excluding
Depreciation
    
    
    60,859,258
    
    
    
    
    
    
    
    
    
    
    
    60,859,258Operating, distribution and
Administrative
    
    
    43,423,415
    
    
    
    589,115
    
    
    
    (1,639,098
    )
    
    
    42,373,432Depreciation
    
    
    4,616,360
    
    
    
    340,174
    
    
    
    
    
    
    
    4,956,534Amortization of intangibles
    
    
    865,196
    
    
    
    84
    
    
    
    
    
    
    
    865,280Loss on disposal of assets
    
    
    120,310
    
    
    
    
    
    
    
    
    
    
    
    120,310Total costs and expenses
    
    
    109,884,539
    
    
    
    929,373
    
    
    
    (1,639,098
    )
    
    
    109,174,814INCOME FROM OPERATIONS
    
    
    20,007,596
    
    
    
    709,725
    
    
    
    
    
    
    
    20,717,321INTEREST EXPENSE
    
    
    3,194,391
    
    
    
    158,230
    
    
    
    
    
    
    
    3,352,621OTHER INCOME, NET
    
    
    180,105
    
    
    
    160,950
    
    
    
    
    
    
    
    341,055EARNINGS BEFORE MINORITY INTEREST
    
    
    16,993,310
    
    
    
    712,445
    
    
    
    
    
    
    
    17,705,755MINORITY INTEREST
    
    
    
    
    
    
    712,445
    
    
    
    
    
    
    
    712,445NET EARNINGS BEFORE TAXES
    
    
    16,993,310
    
    
    
    
    
    
    
    
    
    
    
    16,993,310PROVISION FOR INCOME TAXES
    
    
    6,397,100
    
    
    
    
    
    
    
    
    
    
    
    6,397,100NET EARNINGS
    
    $
    10,596,210
    
    
    
    
    
    
    
    
    
    
    $
    10,596,210
 - 22 -




---



##### Table of Contents



Variable InterestValley
    
    
    EntitiesSegment
    
    
    Segment
    
    
    Eliminations
    
    
    CompanyNET SALES
    
    $
    63,577,966
    
    
    $
    600,896
    
    
    $
    (600,896
    )
    
    $
    63,577,966COSTS AND EXPENSESCost of products sold, excluding
depreciation
    
    
    31,061,046
    
    
    
    
    
    
    
    
    
    
    
    31,061,046Operating, distribution and
administrative
    
    
    18,867,592
    
    
    
    280,423
    
    
    
    (600,896
    )
    
    
    18,547,119Depreciation
    
    
    1,990,600
    
    
    
    136,716
    
    
    
    
    
    
    
    2,127,316Amortization of intangibles
    
    
    191,422
    
    
    
    
    
    
    
    
    
    
    
    191,422Loss on disposal of assets
    
    
    (10,259
    )
    
    
    (141,093
    )
    
    
    
    
    
    
    (151,352
    )Total costs and expenses
    
    
    52,100,401
    
    
    
    276,046
    
    
    
    (600,896
    )
    
    
    51,775,551INCOME FROM OPERATIONS
    
    
    11,477,565
    
    
    
    324,850
    
    
    
    
    
    
    
    11,802,415INTEREST EXPENSE
    
    
    1,070,122
    
    
    
    96,533
    
    
    
    
    
    
    
    1,166,655OTHER INCOME, NET
    
    
    80,165
    
    
    
    78,708
    
    
    
    
    
    
    
    158,873EARNINGS BEFORE MINORITY INTEREST
    
    
    10,487,608
    
    
    
    307,025
    
    
    
    
    
    
    
    10,794,633MINORITY INTEREST
    
    
    
    
    
    
    307,025
    
    
    
    
    
    
    
    307,025NET EARNINGS BEFORE TAXES
    
    
    10,487,608
    
    
    
    
    
    
    
    
    
    
    
    10,487,608PROVISION FOR INCOME TAXES
    
    
    4,064,032
    
    
    
    
    
    
    
    
    
    
    
    4,064,032NET EARNINGS
    
    $
    6,423,576
    
    
    
    
    
    
    
    
    
    
    $
    6,423,576
  Variable InterestValley
    
    
    EntitiesSegment
    
    
    Segment
    
    
    Eliminations
    
    
    CompanyNET SALES
    
    $
    50,488,243
    
    
    $
    614,302
    
    
    $
    (614,302
    )
    
    $
    50,488,243COSTS AND EXPENSESCost of products sold, excluding
Depreciation
    
    
    23,310,094
    
    
    
    
    
    
    
    
    
    
    
    23,310,094Operating, distribution and
Administrative
    
    
    15,583,566
    
    
    
    193,699
    
    
    
    (614,302
    )
    
    
    15,162,963Depreciation
    
    
    1,556,360
    
    
    
    76,807
    
    
    
    
    
    
    
    1,633,167Amortization of intangibles
    
    
    242,975
    
    
    
    28
    
    
    
    
    
    
    
    243,003Loss on disposal of assets
    
    
    59,038
    
    
    
    
    
    
    
    
    
    
    
    59,038Total costs and expenses
    
    
    40,752,033
    
    
    
    270,534
    
    
    
    (614,302
    )
    
    
    40,408,265INCOME FROM OPERATIONS
    
    
    9,736,210
    
    
    
    343,768
    
    
    
    
    
    
    
    10,079,978INTEREST EXPENSE
    
    
    952,609
    
    
    
    51,814
    
    
    
    
    
    
    
    1,004,423OTHER INCOME, NET
    
    
    54,175
    
    
    
    45,743
    
    
    
    
    
    
    
    99,918EARNINGS BEFORE MINORITY INTEREST
    
    
    8,837,776
    
    
    
    337,697
    
    
    
    
    
    
    
    9,175,473MINORITY INTEREST
    
    
    
    
    
    
    337,697
    
    
    
    
    
    
    
    337,697NET EARNINGS BEFORE TAXES
    
    
    8,837,776
    
    
    
    
    
    
    
    
    
    
    
    8,837,776PROVISION FOR INCOME TAXES
    
    
    3,297,998
    
    
    
    
    
    
    
    
    
    
    
    3,297,998NET EARNINGS
    
    $
    5,539,778
    
    
    
    
    
    
    
    
    
    
    $
    5,539,778
 SEGMENT DATA
   - 23 -




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June 30,
    
    
    March 31,2005
    
    
    2006Valley
    
    $
    161,350,966
    
    
    $
    200,750,610Variable Interest Entities
    
    
    13,734,995
    
    
    
    14,403,565Total assets
    
    $
    175,085,961
    
    
    $
    215,154,175
  
 Item 2.
    
    Managements Discussion and Analysis of
Financial Condition and Results of Operations
  Forward-Looking Statements
      - 24 -




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- 25 -




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TRADE RECEIVABLES
  - 26 -




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INVENTORIES
  GOODWILL AND OTHER INTANGIBLE ASSETS
  EMPLOYEE HEALTH CARE BENEFITS RESERVES
  VALUATION OF LONG-LIVED ASSETS
  INCOME TAXES
  - 27 -




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VARIABLE INTEREST ENTITIES
    Three Months
    
    Nine MonthsEnded
    
    EndedMarch 31,
    
    March 31,2006
    
    2005
    
    2006
    
    2005Net Sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of products sold, excluding
depreciation
    
    
    48.9
    
    
    
    46.2
    
    
    
    49.1
    
    
    
    46.9Operating, distribution and
administrative
    
    
    29.2
    
    
    
    30.1
    
    
    
    31.8
    
    
    
    32.6Depreciation
    
    
    3.3
    
    
    
    3.2
    
    
    
    3.7
    
    
    
    3.8Amortization of intangibles
    
    
    0.3
    
    
    
    0.5
    
    
    
    0.4
    
    
    
    0.7Total costs and expenses
    
    
    81.7
    
    
    
    80.0
    
    
    
    85.0
    
    
    
    84.0Income from operations
    
    
    18.3
    
    
    
    20.0
    
    
    
    15.0
    
    
    
    16.0Interest expense
    
    
    1.8
    
    
    
    2.0
    
    
    
    2.0
    
    
    
    2.6Other income, net
    
    
    0.5
    
    
    
    0.2
    
    
    
    0.4
    
    
    
    0.2Earnings before minority interest
    
    
    17.0
    
    
    
    18.2
    
    
    
    13.4
    
    
    
    13.6Minority interest
    
    
    0.5
    
    
    
    0.7
    
    
    
    0.5
    
    
    
    0.5Net earnings before taxes
    
    
    16.5
    
    
    
    17.5
    
    
    
    12.9
    
    
    
    13.1Provision for income taxes
    
    
    6.4
    
    
    
    6.5
    
    
    
    5.0
    
    
    
    4.9Net earnings
    
    
    10.1
    %
    
    
    11.0
    %
    
    
    7.9
    %
    
    
    8.2
    %
  Comparison of Three Months Ended March 31, 2006 and 2005
  - 28 -




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- 29 -




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Comparison of Nine Months Ended March 31, 2006 and 2005
        - 30 -




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Payments Due By Period (In Thousands)Less Than
    
    
    1-3
    
    
    4-5
    
    
    More ThanContractual Obligations
    
    Total
    
    
    3 Months
    
    
    Years
    
    
    Years
    
    
    5 YearsLong-Term Debt Including
Current Maturities
    
    $
    77,298
    
    
    $
    2,568
    
    
    $
    70,905
    
    
    $
    1,595
    
    
    $
    2,230Estimated Interest Payments
    
    
    14,150
    
    
    
    1,163
    
    
    
    12,432
    
    
    
    422
    
    
    
    133Interest Rate Swap Payments
    
    
    2,101
    
    
    
    256
    
    
    
    1,845
    
    
    
    
    
    
    
    Interest Rate Swap Receipts
    
    
    (2,460
    )
    
    
    (300
    )
    
    
    (2,160
    )
    
    
    
    
    
    
    Operating Leases, Net of
Intercompany Eliminations
    
    
    9,244
    
    
    
    426
    
    
    
    5,171
    
    
    
    3,647
    
    
    
    Purchase Obligations
    
    
    1,957
    
    
    
    475
    
    
    
    1,482
    
    
    
    
    
    
    
    Total Obligations
    
    $
    102,290
    
    
    $
    4,588
    
    
    $
    89,675
    
    
    $
    5,664
    
    
    $
    2,363
   - 31 -




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VariableInterestFiscal year ending June 30,
    
    Valley
    
    
    Entities
    
    
    CompanyRemainder of 2006
    
    $
    215,711
    
    
    $
    2,351,887
    
    
    $
    2,567,5982007
    
    $
    651,990
    
    
    $
    819,271
    
    
    $
    1,471,2612008
    
    $
    299,613
    
    
    $
    848,414
    
    
    $
    1,148,0272009
    
    $
    67,404,365
    
    
    $
    881,112
    
    
    $
    68,285,4772010
    
    $
    61,708
    
    
    $
    842,938
    
    
    $
    904,6462011
    
    $
    32,024
    
    
    $
    659,155
    
    
    $
    691,179Thereafter
    
    $
    
    
    
    $
    2,229,509
    
    
    $
    2,229,509Total
    
    $
    68,665,411
    
    
    $
    8,632,286
    
    
    $
    77,297,697
    - 32 -




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New Accounting Standards
     
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  - 33 -




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Balance of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    There
    
    
    
    
    
    
    Fair2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    After
    
    
    Total
    
    
    Value(In Thousands)LiabilitiesLong term
debt  ValleyFixed rate
    
    $
    215
    
    
    $
    652
    
    
    $
    300
    
    
    $
    189
    
    
    $
    62
    
    
    $
    32
    
    
    $
    1,450
    
    
    $
    1,256Average interest rate
    
    
    8.44
    %
    
    
    6.12
    %
    
    
    5.95
    %
    
    
    4.55
    %
    
    
    4.82
    %
    
    
    4.90
    %Variable rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,216
    
    
    
    
    
    
    
    
    
    
    $
    67,216
    
    
    $
    67,216Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.91Long term
debt - Variable Interest Entities mortgage debtFixed rate
    
    $
    2,352
    
    
    $
    819
    
    
    $
    848
    
    
    $
    881
    
    
    $
    843
    
    
    $
    2,889
    
    
    $
    8,632
    
    
    $
    6,957Average interest rate
    
    
    6.47
    %
    
    
    6.72
    %
    
    
    6.25
    %
    
    
    6.28
    %
    
    
    6.30
    %
    
    
    6.25
    %Interest rate swapsVariable to fixed
    
    $
    25,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    433Average pay rate
    
    
    4.1
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average receive rate
    
    
    4.8
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    CommitmentsOperating leases
    
    $
    1,042
    
    
    $
    4,197
    
    
    $
    4,276
    
    
    $
    4,383
    
    
    $
    4,492
    
    
    $
    4,604
    
    
    $
    22,994Intercompany
elimination (1)
    
    
    616
    
    
    
    2,499
    
    
    
    2,561
    
    
    
    2,625
    
    
    
    2,691
    
    
    
    2,758
    
    
    
    13,750Company total
    
    $
    426
    
    
    $
    1,698
    
    
    $
    1,715
    
    
    $
    1,758
    
    
    $
    1,801
    
    
    $
    1,846
    
    
    $
    9,244
 
 (1)
    
    Reflects the elimination of intercompany rent as a result of FIN 46R,
Consolidation of Variable Interest Entities at March 31, 2006. 
 Item 4. Controls and Procedures
     - 34 -




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 6. Exhibit Index
 31.1
    
    Certification of the Chief Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of the Chief Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of the Chief Executive Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of the Chief Financial Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
 
 - 35 -




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SIGNATURES
  VALLEY NATIONAL GASES INCORPORATEDMay 12, 2006
    /s/  James P. HartJames P. HartChief Financial Officer and
Duly Authorized Officer - 36 -